The Singapore Exchange said it is making a $8.3bn (£5.27bn) cash and shares takeover offer for the operator of the Australian bourse, aiming to vault from second-tier stock market to leading Asian finance centre.

The combined exchange company would be the world's fifth-largest by market value and rank as the second-largest stock market in Asia by number of listed companies, the two exchanges said in a joint statement. But by other measures it would still rank behind Tokyo, Hong Kong and Shanghai.

The deal aims to give both exchanges a better chance of prospering amid increased competition within Asia and as cross-border trading platforms like Chi-X Europe usurp the dominance of established stock exchanges.

The Australian Securities Exchange, known as ASX, is set to lose its monopoly on operating a stock market in Australia in 2011 and an affiliate of Chi-X Europe is planning to set up a trading system once the monopoly is abolished. Singapore, meanwhile, has long lagged behind Hong Kong and Tokyo as a regional financial centre.

"The capital flow we see today is really changing from west to east," said Singapore Exchange chief executive Magnus Bocker at a news conference. "This will be the gateway to Asian capital markets."

The exchange operating company formed from the takeover of ASX would have a market value of $12.3bn and be responsible for some 2,700 listed companies.

According to September data from the World Federation of Exchanges, the combined exchange would list companies worth about $1.9tn, the fourth most in Asia behind Tokyo, Hong Kong and Shanghai. Companies traded on the New York Stock Exchange have a total market capitalisation of $12.3tn, the most in the world.

Combined trading volume of the Singaporean and Australian exchanges was worth about $1tn during the first nine months of the year, the sixth most in Asia and far behind global leader NYSE which has had volume worth $13.8tn in the January-to-September period.

ASX shares surged more than 20% when trading resumed after the announcement to AU$43.49. Shares in Singapore Exchange, also known as SGX, fell 5.3% to 9.04 Singapore dollars (£4.41).

The companies hope to finalise the deal in the second quarter of 2011, but will need the approval of regulators in each country including Australia's Foreign Investment Review Board and the Australian treasurer, Wayne Swan.

"I don't think we would have announced it if we didn't believe that the approvals would be forthcoming," ASX chief executive Robert Elstone said.

The chief of Australia's competition regulator said he did not see any potential problems with the proposed deal.

"I think it's a matter between the Singapore Exchange and the Australian exchange, and I can't see that raising competition issues for us," Graeme Samuel, chairman of the Australian Competition and Consumer Commission, told Australian Broadcasting Corp radio.

"Of course we're much more focused on the potential for new competitors to enter into the Australian market in terms of stock exchange dealings," he said.